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| Marching ahead |
Calcutta, July 10: Single premium life insurance polices continued to rule the roost in 2004-05, accounting for over 63 per cent of the growth in new business, according to data released by the Insurance Regulatory and Development Authority.
This is despite the fact that the government has done its best to discourage single premium policies through a regressive income tax benefits structure.
Income tax rules say that if the premium amount on any policy is more than 20 per cent of the sum assured, one cannot claim tax benefit for the amount in excess of that.
“In our country, where most of the people buy insurance with the purpose of tax saving, it was expected to curb single premium policies. But the insurance companies have started offering single premium policies where the life cover is five times the premium amount so that the total premium amount gets eligible for tax benefit,” explain industry sources.
“Also, individuals who wish to take life insurance other than for tax benefits, more often than not, prefer to opt for single premium policy so that they do not have to worry about paying premium year after year,” they added.
And such a preference is evident from the statistics revealed by the insurance regulator of our country.
Of the total increase of Rs 6,674 crore, the individual single premium segment has risen by Rs 4,219 crore and the individual non-single premium segment by Rs 2,098 crore. This shows that the growth in life insurance is still driven by individuals, and that the single premium policies are the most popular of them all, accounting for 95 per cent of the growth of the industry.
While the new business in life insurance in 2004-05 grew 35.7 per cent, the individual single premium segment has risen by 207 per cent and the sum assured grew by Rs 3,892 crore, or 87 per cent.